Total concessions (NCSO) granted each month. Will they become permanent?

Dec 8, 2022 | Generics

Since price concessions were first granted in 2003, the number has been gradually increasing each month.  During 2022 the number granted has equalled or exceeded 100 in 8 months out of 11.

Additionally we have noticed that products likely to be granted concessions have very narrow pharmacy profit margins. This makes sense since it is the PSNC, representing pharmacies, which negotiates concession with the department of health DHSC.

However, this increasing trend highlights a serious problem with the way these products are reimbursed. This is done using the drug tariff, and in order to supply good value for tax payers some products have their tariff squeezed as much as possible.

This may be great for tax payers in the short term, but it’s not great for pharmacies, wholesalers and manufacturers. Pharmacies struggle to make a profit, despite the concession, as often it’s not high enough and they spend inordinate amounts of time chasing shortages.

The wholesalers do everything they can to keep supply going, but they too have problems with profit margins and shortages.

The manufacturers have to decide which products they will be supplying in a year’s time, and commission their own production or contracted manufacturers to make these. However, this process can take as long as two years and as they are commercial companies they cannot make loss making products indefinitely.

Currently about 110 generic products are reimbursed at less than £1.00 and industry insiders tell us they cannot ship empty boxes for this price, much less fill them with medicines.

There is also a big problem with branded generics which make up a large part of our UK medicine cabinet. Because they are branded they are covered by the VPAS scheme which means the manufacturers have to pay a rebate back to the DHSC. They are for the most part sold and reimbursed at generic prices, and the 30% rebate which has been forecast for 2023 will make the majority unprofitable.

The loss of branded generics from the UK market will not easily be filled. It takes 2 years to get a new product license approved by the MHRA and in many cases the manufacturers have been told by the regulator to use brand names.

In our view all of this means that the concessions will increase in number each month and may for some products become permanent. But even a high concession price may not entice new manufacturers back into the UK market, as they may expect it to end and for prices to revert to the low unprofitable drug tariff rate.

If we want to fix shortages, we will need to fix the drug tariff and VPAS as well first.

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